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The Wall Street Journal: SEC’s efforts to rein in Elon Musk’s tweets have been largely toothless

WASHINGTON — The Securities and Exchange Commission has tried for several years to get Elon Musk to behave more like a typical corporate leader. It hasn’t worked.

The SEC sued Musk and Tesla Inc. 
TSLA,
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 in 2018 over tweets the regulator deemed fraudulent, settling the case for a combined $40 million and changes to the company’s corporate governance. As part of the deal, it also fashioned a unique way to restrain Musk’s social-media habit: forcing the company to preapprove any statement by its CEO that could move markets.

The Wall Street Journal reported Tuesday that SEC officials wrote Tesla twice, in 2019 and 2020, arguing that some of Musk’s tweets should have undergone the required oversight. Tesla disagreed, telling the SEC that his messages weren’t within the scope of the agreement.

There was no precedent for the communications-oversight policy in financial enforcement, although regulators often prod companies to improve compliance in the wake of scandals or missteps. Restraining how a brash CEO communicates with the public and investors has only led to more feuds with Musk and Tesla, who seem to understand the leverage they have.

“Because Elon is so intertwined with this company, any serious enforcement action against Musk has the potential to harm the company and shareholders,” said David Rosenfeld, a former SEC official now teaching law at Northern Illinois University. “It could end up being counterproductive. Musk has been poking the bear because he knows he can get away with it.”

An expanded version of this report appears on WSJ.com.

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